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Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
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Experience:  GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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is persoal check written by foreigner in usa bank giving

Customer Question

is persoal check written by foreigner in usa bank giving to us resident subject to usa gift tax ?
Submitted: 5 years ago.
Category: Tax
Expert:  Merlo replied 5 years ago.
HelloCustomer

A US resident is not subject to gift tax on foreign gifts, regardless of whether the money came from a foreign account or from an account at a US bank.

When a US citizen or US resident alien receives a foreign gift which exceeds the value of $100,000 in any one calendar year, the person receiving the gift must report receiving it on Form 3520. There is no tax due with the form, it is simply a reporting requirement.

Filing the form 3520 is really for your own protection, as in the event you are ever selected for a random audit, you would have a clear record of reporting where that money came from.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you cpa.

Customer: replied 5 years ago.
is a persoanal check a intangible personal property ? any source for confirming the yes is the answer ?
Expert:  Merlo replied 5 years ago.
Hello again cpa,

We have had questions like this come through the forum before. It seems people are trying to find loopholes or something of that nature by claiming that a check is not tangible property. There is nothing in the tax code which specifically addresses the issue of whether or not a check or a money order or any similar instrument is considered to be tangible property, but in a case where tax would apply, you can rest assured the IRS considers it to be the same as cash.

In your particular case, it does not seem to be relevant, because there is no tax due to you anyway. It is strictly a reporting requirement.

Customer: replied 5 years ago.
thank for your reply. There is a direct relationship to the question. If the personal check is a tangible personal property then check seems to be subject to us gift tax . as far as i know only the intangible is not subject to usa gift tax ?
Expert:  Merlo replied 5 years ago.
Hello againCustomer

First of all, there is no gift tax in the US, until a taxpayer reaches a point where he has given more than $1 million in gifts in his lifetime. That is the current lifetime exclusion allowed to each taxpayer on gifts.

However in your case, your original post said that the gift was coming from a foreign person, so I assumed that person is not a US citizen. If that is the case and the person giving you the gift is not a US citizen, then he is not subject to US tax laws. That being the case, he could give you $10 million and there would still be no gift tax due.

Gift tax is only imposed on the donor of the gift, and only when that donor has exceeded his lifetime limit of $1 million. If the donor is not a US citizen, he is not subject to US tax laws, and he can give you as much as he wants to. You would never owe any tax. You are simply required to report the gift on the Form 3520 once it exceeds $100,000.

Customer: replied 5 years ago.
thank for your reply. There is a direct relationship to the question. If the personal check is a tangible personal property then check seems to be subject to us gift tax . as far as i know only the intangible is not subject to usa gift tax ? but if the gift is tangible personal property , then the gift is subject to usa gift tax. the exclusion is $13000. only,not 1 million dollars.I believe that any thing tangible property given in usa is subject to gift tax.
Expert:  Merlo replied 5 years ago.
Hello againCustomer

You are incorrect in your information.

Every taxpayer is allowed a $1 million lifetime exemption on gifts before any gift tax is due. They are also allowed to give annual gifts of up to $13,000 without having those gifts apply towards the $1 million lifetime exemption, and without having to report those gifts.

If a taxpayer gives someone a gift that is less than $13,000 in one year, the gift does not need to be reported, and it does not apply against the $1 million lifetime exclusion.

If a taxpayer gives someone a gift that exceeds the $13,000 annual limit, then the value of that gift must be reported on Form 709. There is still no tax due unless that taxpayer has already used up his $1 million lifetime exemption. But the gift still needs to be reported, as it then reduces the $1 million lifetime exemption to which he is entitled.

Tangible or intangible property has absolutely nothing to do with it.

And none of this even applies to someone who is not a US citizen. The IRS cannot impose or enforce a gift tax on someone who is not a citizen of this country.

Please refer to the following IRS publication under the section titled Unified Credit (Applicable Exclusion Amount) and you will see where it shows that $1 million in lifetime gifts is exempt from tax.

http://www.irs.gov/publications/p950/ar02.html#d0e135

If this was helpful please press the Accept button.

Thank you.



Customer: replied 5 years ago.
sec.2505 states that unified credit against gift tax only apply to us citizen and resident .there is no unified credit for non resident alien. could you tell me any exemption amount applicable to non resident alient and the source of the code .? As I know the exemption amount for nonresidet taxable estate tax is only $ 60000. not 3.5 million.
Expert:  Merlo replied 5 years ago.
Hello again cpa,

I am apparently not explaining this clearly enough, so I am going to opt out of this question. That will put it back on the open board so that someone else can try to assist you with this.
Expert:  Ed Johnson replied 5 years ago.

DearCustomer

 

I see the other expert has opted out. Your whole question seems to hing on assuming a check is tangible property.

 

the other expert is generally correct.

 

A check is not considered tangible property because in and of itself it represents bank deposits which are intangible. however depending on exact circumstances it could mutate to tangilbe property. Please read on.

 

by definition tangible property does not include a check used to transfer money from one institution to another or to make payment to an individual.

 

A check is a cash instrument and not tangible property. this is because bank deposits are not considered tangible.

 

Also it is true that non-resident aliens are not subject to gift tax unless the property they are gifting is resident in the U.S.

 

If the donor is not resident in the U.S.

 

AND if the donation (or gift) is a check drawn on a foreign bank, transferring money to a resident of the U.S. or the residents bank, there is no gift tax due.

 

HOWEVER: if the money comes from a U.S.BAnk then the money is considered situated in the U.S. A check per se is intangible because it represents deposits, but cash from a U.S. bank account to a resident even if owned by the non-resident would be subject to gift tax.

 

Read this article: http://www.phillipsnizer.com/pdf/Article-YouMustRememberThisT&E-MG12-05.pdf

 

It is possilbe that this could be mutated to gift tangible property and subject to gift tax.

 

 

 

 

Customer: replied 5 years ago.

Thank you for your information. However I do find the the answer is in the form 709 instruction.non resident alient do not have unified credit against gift tax. The form specifically state the amount is zero.on line 11. any non resident alien give tangible personal property in usa ( more than annual exclusion) to any one is subject to gift tax. certanin intangible is excluded.My question remains: is personal check written in usa bank an intagible personal property . hopefuly some one will give more definitedly answer.

Expert:  Ed Johnson replied 5 years ago.

The check is not tangible personal property.

 

the money transfered to a u.s. resident from a U..S. bank account is.

Customer: replied 5 years ago.
can you give me any source to indicate the check is an intangible personal property. all examples only mention note , bond and stocks, never mention personal check. and always mention us dollar currency is tangible property.
Expert:  Ed Johnson replied 5 years ago.
I will search it out for you; this will take awhile.
Customer: replied 5 years ago.
As I said nonresident alient give personal tangible property in usa to any one more than annual exclusion amount is subject to gift tax.( no unified credit ).However if the non resident alien give intagible personal property to any one is not subject to gift tax, even though the receipent may be subject to form 3520 reporting ,if the amount is more tnan 100000.My question : If the non resident alien write a personal check from any usa bank account , then give it to his usa son as a gift . Is this check an intangible personal property ?.section 2501 and 2503 only mention note ,stock ,bond as intangible. and the irs has ruled that the us currency is tangible personal property . My question is personal check an intangible personal property , not subject to usa gift tax ?
Expert:  Ed Johnson replied 5 years ago.

Dear cpoachang,

 

I see we may have a language and communication problem. I am being legalistic when I say the check is not tangible. Remember I said some intangible property can be mutated. So maybe I and the other expert missed the exact point of your question.

 

When we are legalistic the check is not tangible property, neither are bank deposits.

 

However when the check is cashed, the cash is tangible. I do not expect you to understand these nuances.

 

Your botXXXXX XXXXXne is that you need to know if there is a gift tax reporting requirement on the money, is that not correct?

 

The answer is yes, because it is a U.S. bank. The article I provided discusses these issues in detail.

 

So you want a reference. To me a reference comes in the form of:

 

Internal revenue Code

Private Letter Rulings by the IRS

IRS general Council rulings or memorandums explaining the IRS position.

 

I understand fully the tax issue related to gifting from Non-residents to residents. I can discuss them freely;

 

The issue is you are demanding evidence to support my statements and statements which I have spent years accumulating as part of my every day practice. That takes time, because now i need to search out those rulings and memorandums which add clarity to the Internal REvenue code.

 

Is this a classroom assignment or a real situation?

Customer: replied 5 years ago.
This is not classroom question.I was asked by my friends, because he likes to have his nonsedient alien father to make a gift by writting a check from a usa bank.
Expert:  Ed Johnson replied 5 years ago.

No problem. I will find your references for you.

 

 

Customer: replied 5 years ago.
have you found the answer ?cpachang
Expert:  Ed Johnson replied 5 years ago.

I had to got to a tax conference with the IRS in Atlanta. I am the chairperson so I had to attend. I am in Atlanta now. I will have a response to you to morrow if that is ok. In the mean time I will opt out in case someone else can provide the information sooner.

 

 

Customer: replied 5 years ago.
I am waiting , within one great.Customer
Customer: replied 5 years ago.
dear XXXXXson : I am still waiting for reference to pinning point the personal check is an intangible property. any on have found the reference Customer

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